Starling Bank takes legal action against bad debtors

Starling Bank has commenced legal action against two dozen bad debtors as it struggles with increasing defaults and scrutiny from the city watchdog over its financial crime controls.

Since May, Starling Bank has submitted winding-up petitions against 24 firms that have defaulted on loans, based on court records.

Three of these companies have never submitted accounts, while another six have been inactive since their incorporation. One debtor’s accounts revealed that for each trading year, “the average number of employees during the year was NIL”.

In its annual report last week, Starling disclosed a 40% rise in the provision for bad loans, reaching £13.9m. Additionally, the Financial Conduct Authority (FCA) launched an investigation last November into “aspects of its anti-money laundering and financial crime systems and control framework”.

The bank warned that “the potential impact of the investigation is currently unquantifiable but could be material”.

Eight of the debtors were given a Starling loan after incorporating in 2019 or later. Starling has faced criticism from politicians for using government-backed lending schemes during the Covid-19 pandemic to expand its loan book.

Starling Bank announced last week that around 90% of its outstanding loans to small and medium-sized enterprises (SMEs) are guaranteed by the UK government.

Source: CITY A.M